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Dollar Weakens vs. World

06/11/2019 9:16 am EST


Bill Baruch

President and Founder, Blue Line Futures

Most currencies appear stronger vs. U.S. dollar after last week’s poor jobs numbers.

Euro (ECM)

Fundamentals: The U.S. dollar slipped on Friday following a bad jobs report. Not only did nonfarm payrolls come in well under expectation but Average Hourly Earnings came in at +0.2% versus +0.3% expected. This lifted the euro to nearly a two-month high and secured a breakout above trend line resistance. Coming out of the weekend, President Trump promised to not impose tariffs on Mexico and while this helps pave the way for finalizing a new North American Trade Agreement, it strengthened all three currencies. Also weighing on the euro was weaker than expected Italian Industrial Production and a deluge of dismal data from the U.K.

This set the tone early although U.S JOLTs Job Openings came in lower than expected. All in all, this encourages more of a consolidation than what was setting up to be a breakout fundamentally and technically. The most pivotal component on the economic calendar this week is U.S CPI data due Wednesday. No inflation will secure the Fed’s ability to cut rates, however, if inflation begins to poke its head then we could have signs of stagflation on our hands.

Technicals: We have held a more upbeat or cautiously bullish approach to trading the euro since the U.S. Dollar Index failed once again to secure a breakout above the 98.00 level and the euro moved above 1.12 last Monday. On Friday, price action ripped to a key retracement level, which was just shy of a front-month trend line from the September high; this is strong resistance at 1.1355-1.1365. However, we consider the euro to be in breakout territory as long as it holds out above 1.1300-1.1318. A failure to hold ground above here will begin to signal a failure and a move below 1.1268-1.1282 will confirm.

Bias: Neutral/Bullish

Resistance: 1.1355-1.1365**, 1.1419**, 1.1510-1.15345

Pivot: 1.1330

Support: 1.1300-1.1318***, 1.1268-1.1282**, 1.1207-1.1214***, 1.11265-1.11565***

Japanese yen (JYM)

Fundamentals: Given a strong risk-on appetite today, safe-havens are under a bit of pressure with gold leading the way lower, down by 1%. The dollar has pared some of Friday’s losses and the yen is lower although last night’s GDP data from Q1 was revised even higher than the surprisingly strong beat three weeks back. U.S equity markets extended gains early in the session with the S&P trading within 2% of its record high but pulled back a bit in the second half. If this stock rally stalls, look for the yen to quickly find support.

Technicals: The yen spent the entire week last week flirting with major three-star resistance at .9284, which was the exact high. This pullback is due given that price action could not secure a close out above that resistance level. We have tightened our previous major three-star support to now come in at .9196-.9198 and we will look to this level as a buying opportunity.

Bias: Neutral/Bullish

Resistance: .9284***, .9326**, .94585**

Support: .9196-.9198***, .9150**, 91075.9109***

Australian dollar (ADM)

Fundamentals: The Aussie dollar has now officially failed at major three-star resistance, slipping sharply on U.S. dollar strength on this Queen’s Birthday holiday in Australia. This comes despite a stronger risk-environment and an overall decent day for commodities outside of energies, gold and silver. There are still tremendous concerns tied to the U.S.-China trade war and overall deteriorating growth conditions around the world. The Aussie has become a complete gauge for China. However, Chinese Trade Balance data was fairly upbeat last night.

Technicals: Price action hit a high of .7024 on Friday as the Aussie ran directly into major three-star resistance at .7001. We are bearish and believe the bears to be in the driver’s seat with price action below .6964-.6970. There was tremendous technical damage over the last few weeks and the recovery rally has now run its course.

Bias: Bearish/Neutral

Resistance: .7001***, .7042-.7056**

Pivot: .6964-.6970

Support: .6943-.6946**, .6809-.6861***

Canadian dollar (CDM)

Fundamentals: The currency gained significant ground on Friday following another strong jobs report from Canada. Today has traded in a tight range despite President Trump promising to not impose tariffs on Mexico late Friday. This is believed to help pave the way for finalizing the new North American Trade Agreement. At the same time, much of that could have been priced on Thursday through Friday when Mexico deployed troops to their southern border with Guatemala.

Technicals:On Friday price action broke out above a trend line from Oct. 1. Ironically, this was the day that the new trade agreement was agreed to in principle and after a spike higher. The top was in; a true sell the news move. On the June 4 Commitment of Traders report there is a 4:1 Leveraged net-short position in the Canadian dollar. This signals that there is significant upside if price action can hold out above its breakout; major three-star support at .7497-.74925. We are bullish until a close below here.

Bias: Bullish/Neutral

Resistance: .7560-.7564**, .7613-7630**, .76595***

Support: .7487-.74925***

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